By David Dayen, a lapsed blogger, now a freelance writer based in Los Angeles, CA. Follow him on Twitter @ddayen

Anyone paying a smattering of attention justifiably raised a skeptical eyebrow at the Office of the Comptroller of the Currency’s assurances to Congress that the Independent Foreclosure Reviews revealed hardly any borrower harm from servicer malfeasance. First of all, from the reporting we know, OCC just dropped this 4.2% error rate number without supporting information from the loan files. Second, the error rate contrasted wildly with what Yves uncovered in her superlative series on Bank of America reviews. Most critically, if the reviews were finding no borrower harm, there would have been no real reason to ditch them. They would have reinforced the bank-supported view that foreclosure fraud was simply overblown, would have silenced critics, would have reduced bank exposure to payouts from the settlement and probably in future litigation. This would have been well worth the expense of paying out another couple billion to the consultants, for the banks to get an on-the-record fact pattern establishing their relative innocence.
That’s what makes the bombshell story from the Wall Street Journal of all places, so damaging to the entire cover story, particularly for the OCC. If true, this actually establishes that the agency at least massaged the truth to Congress, if they didn’t outright lie:

Some 6.5% of files reviewed unveiled errors requiring compensation, officials at the Office of the Comptroller of the Currency said in January. They later revised the error rate to 4.2% after requesting new data, raising the total number reviewed to roughly 100,000 files.
But a breakdown of the information provided to the regulator shows that more than 11% of files examined for Wells Fargo & Co. and 9% of those for Bank of America Corp. had errors that would have required compensation for homeowners, said people who have reviewed the figures. A narrower sample of files—representing cases selected by outside consultants—showed error ratios of 21% for Wells Fargo and 16% for Bank of America, the people said.

The OCC findings appear skewed by the outsize contribution of one bank, J.P. Morgan Chase & Co., which reported an error rate far below rivals that oversaw a much larger universe of loans.

(Incidentally, you have to love the Wells Fargo flak’s claim that the error rate “does not provide conclusive information about actual financial harm.”)

The reason OCC could publish their 4.2% number is that JPMorgan reported just a 0.6% error rate, according to these anonymous sources. They also completed far more reviews than their confreres. PNC Bank reported rates over 20%, but they only delivered a small share of the reviews (Yves may have more on that bit, from her reporting she’s basically gobsmacked that PNC managed to deliver any reviews at all),. How lucky for OCC that the one bank which presented a near-perfect record submitted the most reviews!

It doesn’t pass the smell test at all that you would get such a wide discrepancy, and in particular that JPMorgan Chase would show itself to be such a precision servicer. I remember attending a NACA event where they gave out Jamie Dimon’s cell phone number to homeowners, urging them to call and harass him over the abuse his bank had exhibited on borrowers. They were seen as uniformly the worst by a wide margin.

But of course, as ably documented in this space, the entire concept of real numbers from the reviews is fanciful. When you talk to the actual reviewers, as WSJ did for their story, you get error rate numbers as high as 80%. And the files themselves were kept in such disarray that it borders on impossible to grade them at all. The numbers reported by the banks to OCC merely reflect how successful they were at controlling the review process and limiting the finding of borrower harm. This window into how Deloitte handled the JPMorgan reviews tells you everything you need to know about their numbers:

Two Deloitte employees who performed the review for J.P. Morgan in a Brooklyn office building said workers were encouraged by supervisors to examine pools of loans they knew would be less time-consuming or error-prone as they tried to hit loan quotas.

One of these employees said that at an event last year known in the Brooklyn office as “March Madness,” Deloitte officials encouraged reviewers to avoid problematic loans originated by EMC Mortgage, a troubled mortgage lender J.P. Morgan acquired in 2008.

A Deloitte spokesman said that “because of confidentiality constraints, we are not at liberty to discuss details of the engagement. We fully stand behind the quality of our work.” Deloitte had a team solely devoted to reviewing EMC loans and the consultant did not impose any quotas, said another person familiar with the review.

I guess if you pick and choose what loans to review, I suppose you can get yourself to 0.6%.

If you want to actually gauge the level of servicer abuse, you might go back to one of the only legitimate examinations from a reviewer not paid by banks: the one released as part of the AG settlement by the HUD Inspector General. That review included this infamous statistic, from the aforementioned “super-servicer” JPMorgan Chase:

For Chase, we also reviewed 36 affidavits for foreclosures in judicial States to determine whether the amounts of borrowers’ indebtedness were supported. Chase was unable to provide documentation to support the amounts of borrowers’ indebtedness listed on the affidavits for all except four. When we reviewed the four affidavits, three were inaccurate. Specifically, the amounts of the borrowers’ late charges and accumulated interest did not reconcile with the information in Chase’s mortgage servicing system.

Emphasis mine. So depending on who you believe, either OCC or the HUD IG, servicers either generated error rates of 4.2% or 97.2%. You know, somewhere in there.

This serves as yet another black eye for OCC, which clearly tried to throw a curve by Congress by highlighting the absurdly low error rate figure. Thomas Curry may have inherited this mess, but he’s starting to look as bad as his predecessors. Hopefully the nascent Congressional investigation from Elizabeth Warren and Elijah Cummings will look unkindly on the fertilizer OCC is trying to spread.

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33 comments

So, at last we have some serious evidence that consultants are paid to enable corporate fraud and very little if anything else. Essentially, they are the crown princes of the looting enabling game, exceeding in this capacity, even the work of big time lawyers (and believe me, this is no mean feat). Of course, we all know these consulting firms are staffed by la creme de la creme, the very best of the brightest turned out by our elite business schools, and exactly what does anyone plan to do about this, other than continuing to genuflect to these charming sociopaths in media, and at cocktail parties and country clubs?

I often wonder if anyone receiving outlandish compensation in corporate America does anything resembling honest work?

The answer to your question is “no”. Anyone receiving outlandish “compensation” is a crook — period.

You can find a few CEOs who are doing honest work. You can spot them because they take salaries of $0 or $1, or maybe $300,000, and leave it at that. They buy stock on their own accounts and may make more money on the stock, but they don’t take outlandish rates of “compensation” directly out of the corporate treasury.

I had a borrower call me yesterday, contemplating a short sale because she was behind on an exploding Ocwen ARM. Lender had also apparently instituted forced-placed insurance at over $300 per month, lending a helping hand of course. I told her to head to Naked Capitalism and read as much as she could to educate herself on what’s happening. This is a great follow-up to the series on the Bank of America reviews.

One has to wonder just how much the American people need to be lied to before they decide enough is enough.

The Russians put up with being lied to, and as egregiously as the case outlined by this post, for over 70 years under the Soviet Union. Even the most ardent Soviet admirer would have to admit that the slow decline from ~1960 to 1989 was a period of constant an increasingly unbelievable propaganda as the country began to disintegrate.

The parallels between the Breshnev era and the modern West are clearer than many would like to admit. Frankly, the OCC’s statements would not be out of place in Pravda.

The Soviet Union was an improvement over the Tsars, which accounts for why people went along with it during the Lenin era — and during the Stalin era, there was WWII to win, and he was industrializing — and during the Khrushchev era, there was de-Stalinization, and even then the West was still horrendously racist and sexist compared to the USSR,…

The point at which the Soviet system clearly became worthless was the Brezhnev era, starting in 1964. And Gorbachev arrived in 1985, and he actually recognized that the lies were a problem and instituted an attempt to change them (that’s what “glasnost” was about).

So “70 years” isn’t quite right. I pin it at 20 years from the point when the system became clearly not-worth-it to the point at which people started dismantling it.

HAH = 6 months ago, I got a DWP (Lack of standing!)against Ocwen’s attempt to illgeally foreclose, 3 days later they filed notice of appeal (They never paid the bond required to appeal or docketed it)

The same day the filed NOA they sent a “modifciation and Settlement” offer (huh? I won why do I need to settle?) which basically would have me indemnify Ocwen in exchange for the privilege of resuming monthly payments to Ocwen on a negatively amortizing loan for 30 more years, and appears to have been created to have me provide Ocwen standing, stipulating at least seven times that I would be required to execute documents to perfect Ocwen’s “liens and security interests” and that I would be responsible for the “filing and recording” of deeds to give Ocwen (who is curiously referred to as the “investor”) a security interest in property. I of course ignored it.

Yesterday, I got bill for 2377.00 for forced place insurance…those bastards never stop.

” Hmm. Remember the Independent Foreclosure Review, the program that the O.C.C. and other federal bank regulators trumpeted as the largest effort to compensate victims of big banks’ foreclosure abuses? As my colleague at ProPublica, Paul Kiel, detailed last year, that review involved consultants like Promontory essentially letting banks decide who was victimized. How well did that work? So well that the regulators had to scuttle the program because it hadn’t given one red cent to homeowners but somehow, I don’t know how, managed to send more than $1.5 billion to consultants — including Promontory.

Promontory maintains that it complied with the conditions set out by the O.C.C. And the review was replaced by a settlement, which the regulators say will compensate victims — though the average payout is small beer.

Who, exactly, makes the rules at the O.C.C.? I mentioned “Freaky Friday.” That’s because at the agency, Ms. Williams is being replaced by Amy Friend. And where is Ms. Friend coming from? Wait for it … Promontory. In March, maybe they’ll do the switcheroo back.”

Oh….
well, if you define “public integrity” as the maximum amount the public can be f*cked, er, that is harsh, how about ‘fleeced’ by banks, well yes, our former and new regulators are extremely talented….

Do I have this right? The banks bought the result they wanted for $2B — very few foreclosure errors. Both rating agencies and “independent” reviewers didn’t look any closer than their clients wanted them to. It was in their financial interest not to.

Speaking of Elizabeth Warren, I assume she is fully behind and ready to enact Conyers’ bill in the house to get rid of the sequester should it make it to the Senate. I tried to call her on this, but she is not answering her phone, at least not in Boston.

This is the second time I tried her at her Boston office: (617) 565-3170. I got the same result as the first time, a recorded message. I left my own message which included the notion that if we can bail out the banks and make sure the bank CEO’s get gigantic bonuses, why can’t we also have someone live at at her Massachusetts office answering the phone?

Does anyone have a better number?

Anyway, I’m waiting with sandwiches by the phone for her (or someone) to call me back assuring me that she wants to end this ridiculous scare tactic sequester as much as I do and that in addition she is bound and determined to follow through on her Congressional Review of the Independent Foreclosure Reviews no matter the political cost, and that I didn’t simply vote for a Massachusetts version of Bernie Sanders from the salad bowl state (Vermont is very green).

I’m absolutely convinced by all this that if we simply use the political system we have, particularly in the primaries, we should be able to resolve all this hoop-la before the next ice age and probably – if we’re lucky – not too long after we’ve gone extinct.

In Sep 2012 the OCC & Fed Res Bank conducted a study and it turn up that 800,000 applications to the HAMP that should have receivied a modification but did not.

Everyone is ignoring Government insured loans (FHA, VA, USDA) that could not be foreclosed because the of the way the endorsed in blank Notes, which are relinquish to Ginnie Mae and the blank Note become the property of Ginnie Mae.

However because the Notes are not purchase by Ginnie Mae the Notes are no longer Notes as they contain no debt attached to the documents. In order to call these loan due Ginnie Mae must have been owed a debt.

You got a fraud of as many as 800,000 government loans from 2009-2010 which account for the $70 billion in FHA loan losses. Government insured loan in a Ginnie Mae pool were not modified because the Ginnie Mae not a lender and is not signed up for the HAMP, but also is not the “holder in due course” and cannot have a surrogate such as a servicer or MERS assign that title to another, as Ginnie Mae itself cannot be on title because it does not have a financial interest in the Note.

So you got a big Ponzi over at Ginnie Mae and False Claim by the lenders/serviers!

All this talk in such poetic terms;
Alas, we have crossed these berms.
Whitewater scandalously leaped the fall;
President taken by con-men…all?
Prosecute the innocent, for they have;
nothing to say?
Advanced communications are part of the day!!
Tumbling water falls in thunder
Economic wonder?
Economic blunder!!
Plutocrats jumped all-in
Witnesses chagrin.
Resounding questions abound!
Why did they thrust themselves upon the ground?
Lured by the memories of whitewater bliss;
savings-and-loan enterprises gone amiss.
Speculators ‘a speculating; ‘ain’t no reason’s ‘t turn back’
DOJ is just plain slack; (because; Obviously, they be Considering Crap (OCC).)
Nature issues a battle cry: humans – fry, fry, fry.

They knew from the beginning anyone not dependent on the MSM wouldn’t fall for a trivial error/fraud rate. So it’s a matter of window dressing.

Now they can always point to the price tag as proving it was A Serious Job and it took A Lot of Effort. A billion is real money and you can only get Real Results with Real Money. They put down the money because it Needed To Be Done.

$2B is enough for the yearly office overhead of most of the Fortune 500 companies, outside of executive looting. I assume there were several thousand office workers involved, all of whom were paid union salaries and had full benefits while they were employed.

No kidding. Selective sampling has been the rage for eons. Back in my auditing days you would take 15 files out of the cabinet for a 10 sample test. Then throw out any ones with small errors (as these would just give you more to-dos from your supervisor – and require time that you did not have if you wanted to meet budget), and then write .. “based on the sample selected ….” and of course you would only initial the 10 samples that were clean.

the whole process was useless because most of the servicers do not keep ANY records…LPS in jacksonville is the actual holder of 50% of all mtg payment records(the nice folks who invented cloning…i mean robosigning…) and Fiserv claims to hold 25% of the records(you know fiserv…the good folks who allowed bernie mac..i bernie madoff to doctor the computer records)…in the gartner/mckinley MBA world(Move the Business to Asia)financial institutions were encouraged to “let go” of their technology costs and allowed these firms(LPS/Fiserv & Co) to take over the “record keeping”, along with third party lock box agreements and using RR Donnelley(and other printers) to actually mail out the monthly statements from internally driven access to the databases…it is almost impossible for any servicer foreclosure mill to comply with the requirements to move for a short cut summary judgment with laughable affidavits, especially since most of the affidavits are created by the foreclosure mills(or were until recently) who then sent off the documents to be “executed” by some mystery former convenience store clerk working for LPS or NTC in palm harbor florida…

I am not an attorney, and am not offering any legal advice. However, ask your qualified attorney why you should NOT be looking at FRAUD IN YOUR UNDERWRITING AND APPRAISAL? There are a few very good attorneys in Florida. Yet, unfortunately, there are many attorneys who are just kicking the can down the road. Is your lawyer this good? (Harrington 17 Affirmative Defenses: http://www.scribd.com/doc/122327421/A-F )

Consider the following FACTS!

A Miami Herald investigation published Sunday showed that more than 10,000 people with criminal records were permitted to work in Florida’s mortgage industry during the housing boom between 2000 and 2007. Of those, 4,065 cleared background checks despite having committed crimes that state law requires regulators to screen, including bank robbery, racketeering and extortion. Florida has the highest mortgage fraud rate in the country. http://www.miamiherald.com/static/multimedia/news/mortgage/sink.html

So if Florida Attorneys have generally failed their clients by confusing TILA/RESPA rescission and tender (of an underwater property?) AND ignoring void/voidable CONTRACT issues, consider the two following Florida State Statutes (the LAW!) The corresponding laws in Florida are located under “Mortgage Fraud” (F.S. 817.545) and “Claims in Recoupment.” (F.S. 673.3051)

817.545Mortgage fraud.—
(1)For the purposes of the section, the term “mortgage lending process” means the process through which a person seeks or obtains a residential mortgage loan, including, but not limited to, the solicitation, application or origination, negotiation of terms, third-party provider services, underwriting, signing and closing, and funding of the loan. Documents involved in the mortgage lending process include, but are not limited to, mortgages, deeds, surveys, inspection reports, uniform residential loan applications, or other loan applications; appraisal reports; HUD-1 settlement statements; supporting personal documentation for loan applications such as W-2 forms, verifications of income and employment, credit reports, bank statements, tax returns, and payroll stubs; and any required disclosures.
(2)A person commits the offense of mortgage fraud if, with the intent to defraud, the person knowingly:
(a)Makes any material misstatement, misrepresentation, or omission during the mortgage lending process with the intention that the misstatement, misrepresentation, or omission will be relied on by a mortgage lender, borrower, or any other person or entity involved in the mortgage lending process; however, omissions on a loan application regarding employment, income, or assets for a loan which does not require this information are not considered a material omission for purposes of this subsection.
(b)Uses or facilitates the use of any material misstatement, misrepresentation, or omission during the mortgage lending process with the intention that the material misstatement, misrepresentation, or omission will be relied on by a mortgage lender, borrower, or any other person or entity involved in the mortgage lending process; however, omissions on a loan application regarding employment, income, or assets for a loan which does not require this information are not considered a material omission for purposes of this subsection.
(c)Receives any proceeds or any other funds in connection with the mortgage lending process that the person knew resulted from a violation of paragraph (a) or paragraph (b).
(d)Files or causes to be filed with the clerk of the circuit court for any county of this state a document involved in the mortgage lending process which contains a material misstatement, misrepresentation, or omission.
(3)An offense of mortgage fraud may not be predicated solely upon information lawfully disclosed under federal disclosure laws, regulations, or interpretations related to the mortgage lending process.
(4)For the purpose of venue under this section, any violation of this section is considered to have been committed:
(a)In the county in which the real property is located; or
(b)In any county in which a material act was performed in furtherance of the violation.
(5)(a)Any person who violates subsection (2) commits a felony of the third degree, punishable as provided in s. 775.082, s. 775.083, or s. 775.084.
(b)Any person who violates subsection (2), and the loan value stated on documents used in the mortgage lending process exceeds $100,000, commits a felony of the second degree, punishable as provided in s. 775.082, s. 775.083, or s. 775.084.
History.—s. 13, ch. 2007-182; s. 2, ch. 2008-80.

2010 Florida Statutes (including Special Session A) Title XXXIX COMMERCIAL RELATIONS Chapter 673 UNIFORM COMMERCIAL CODE: NEGOTIABLE INSTRUMENTS – 673.3051 Defenses and claims in recoupment.— (1)Except as stated in subsection (2), the right to enforce the obligation of a party to pay an instrument is subject to: (a)A defense of the obligor based on: …. 2.Duress, lack of legal capacity, or illegality of the transaction which, under other law, nullifies the obligation of the obligor; 3.Fraud that induced the obligor to sign the instrument with neither knowledge nor reasonable opportunity to learn of its character or its essential terms;

Share with your qualified attorneys… make them ask you the right questions up front, or run away from them… don’t be bamboozled about statute of limitations if you are now just discovering you were set up to fail in your underwriting and appraisal. Most Americans were DEFRAUDED during the 2003 – 2007 lending (RICO fraud) boom. If I am a victim of a crime, and mortgage fraud can be a crime as committed by industry insiders, let’s now all watch to see if justice, fact and law, and due process even exists for defrauded Americans in Florida, and across the country….

The most important fact remains. Homeowners HAD SKIN IN THE GAME (down payments, renovations, repairs, home improvements, etc..) The LOAN SERVICERS have NOT A PENNY IN THE GAME (and can be directly traced to aiding and abetting fraud the originator’s fraud as they were all linked together through the securitization process and chain of title – or lack hereof.) Whoever said that foreclosure court is actually a court of equity? Another fact remains, liars loans, no doc loans, option arms, etc., were all predatory in nature. By setting the homeowners up for almost certain failure, the network of affiliated (RICO ) partners would all be guranteed profits off of the homeowners’ misery. Heaven forbid that defrauded homeowners would ever be able to “get a free house” when the servicers are aiming to get a “free house” for their network as the investors would ultimately be paid back in default insurances or settlements. Offerng only defective loan mods, defective short sales, and defective forebearance programs via the government sanctioned programs only adds insult to injury for the massive amount of (millions of) defrauded homeowners? The PROFITS ARE IN THE PROPERTIES IN REO SALES AFTER FOREWCLOSURE. WALL STREET KNOWS THIS as they have NO SKIN IN THE GAME FROM THE ORIGINAL LOAN!

The key conclusion of the study is that control fraud was “pervasive.”

[A]lthough there is substantial heterogeneity across underwriters, a significant degree of misrepresentation exists across all underwriters, which includes the most reputable financial institutions.

Finance scholars are not known for their sense of humor, but the irony of calling the world’s largest and most harmful financial control frauds our “most reputable” banks is quite wondrous. The point the financial scholars make is one Edwin Sutherland emphasized from the beginning when he announced the concept of “white-collar” crime. It is the officers who control seemingly legitimate, elite business organizations that pose unique fraud risks because we are so loath to see them as frauds.

The PSW 2013 study confirmed one form of control fraud and provided suggestive evidence of two other forms that I will discuss in a future column. The definitive evidence of control fraud that PSW2013 identifies is by mortgage lenders who made, or purchased, mortgages and then resold them to “private label” (non-Fannie and Freddie) financial firms who were creating mortgage backed securities (MBS). The deceit they documented by the firms selling the mortgage loans consisted of claiming that the loans did not have second liens. The lenders knowingly sold mortgages they knew had second liens under the false representations (reps) and warranties that they did not have second liens. (The authors confirm the point many of us have been making for years — the banks that fraudulently sold fraudulent mortgages did have “skin in the game” because of their reps and warranties. The key is that the officers who control the banks do not have skin in the game — they can loot the banks they can control and walk away wealthy.) The PSW 2013 study documents that the officers controlling the home lenders knew the representations they made to the purchasers as to the lack of a second lien were often false (pp. 2, 5 n. 6), that such deceit was common (p. 3), that the deceit harmed the purchasers by causing them to suffer much higher default rates on loans with undisclosed second liens (pp. 20-21), and that each of the financial institutions they studied — the nation’s “most reputable” — committed substantial amounts of this form of fraud.” (Figure 4, p. 59)http://www.huffingtonpost.com/william-k-black/mortgage-fraud_b_2780896.html?utm_hp_ref=fb&src=sp&comm_ref=false#sb=726653,b=facebook

I just received my notice from the IFR that my BoA loan did not qualify for a review because it was not “in foreclosure” during the period 2009-2010. I say it was. They had me in a HAMP trial for 9 months in 2010. After asking for resubmission of documents numerous times, and then losing it all numerous times, they booted me out of HAMP for “missing documents.” II received a Notice of Intent to Accerlerate Foreclosure on December 5, 2010. Does that not mean I was being referred to foreclosure? Can anyone tell me? It says on my notice that now I can write to beloved BofA in Simi Valley to register a complaint if i dont agree with their findings. What a madcap loop of crazy making.

Kristina, Our home was sold at a Sheriff Sale in December of 2009. We fought Freddie Mac and Bank of Americ (Countrywide) in court and lost. We were evicted by Court Order. For some reason, we are not included in ANY settlements. I call, write, file complaints, but they have excluded us too! How can this happen? I even sent in the documents to the Settlement Administrator by registered mail, signature required. I have proof that they received them, yet when I call, they tell me they never got them! It is a JOKE.

i have 6 boxes from a class action on fraud f.h.a. was named so was national city and more going back to 2000 attorney gave them to me no lie if younwould like to see it let me know will fax showing they are listed thanks valerie